Traditionally, the mining narrative has run thus: a prolonged downturn as the new millennium got underway was followed by a China-driven boom and then a bust, mitigated in its aftershocks by the helpful effects of quantitative easing, which made the dollar worth less and made it appear as though commodities were still worth more.
On that narrative we are just beginning to emerge from that process of boom, bust and government-sponsored steadying of the ship, and are about to find out what metals are really worth in the twenty-first century.
So far, so good: the broad answer for those involved in mining the metals seems to be that metals are worth more than they’d thought, but less than they’d hoped.
But that narrative conceals deeper currents.
At their core is the dark truth that money is declining in value. Inexorably.
The inevitability of that decline became more apparent when the major global economies all abandoned the gold standard in the early 1970s as the US needed to jig around with its currency to pay for the Vietnam War.
But it was there beforehand too – just ask anyone who bought a house in the 1950s what they paid for it and the decline in the value of money becomes all too obvious. Put it another way, and the value of property has gone up, but that point is moot, since the value of almost everything else has gone up too.
What’s simpler to say is that the value of money has gone down.
In many ways this is a policy matter.
Governments have been monkeying around with currency for their own ends for years, but it suddenly became much more open, overt and urgent in the wake of the Lehman Brothers collapse in the autumn of 2008.
The US Federal Reserve swung into action and the world learned a new term: “quantitative easing.”
Essentially it meant printing money but in an orderly and electronic fashion as opposed to the chaotic and physical fashion of Zimbabwe in the early 2000s or Weimar Germany in the 1920s.
The jury’s still out as to whether it worked, but the fact that the world economy still is in growth, even if some commentators do from time to time refer to that growth as “anaemic”, speaks to some sort of success.
The by-product though, is a new narrative for the precious metals miners. We can see that throughout the early 2000s the gold price rose steadily as governments gradually took statistical analysis of the M3 money supply behind closed doors.
The reason was simple: governments the world over were fuelling an economic boom with cheap and easy money using the Chinese economic miracle as a get-out-of-jail-free card when it came to inflation.
That bubble burst though and what happened? - surprise, surprise, the gold price went through the roof.
It’s here that the new mining narrative gets interesting, because as anyone who was there at the time knows, although there was a bust in base metals and bulks after the collapse of Lehman, the rise in the gold price continued, and continued such that gold was a boom on the back of a bust.
It only collapsed when there began to be so much money sloshing around the system that the Fed’s plan actually began to work and the global economy started to improve. At that point, the time had come at last to pull back on the money supply - at least temporarily - and so gold fell in 2013.
So where does that leave us today? Note that gold is still trading higher than it was after the collapse of Lehman because there is still more money around. The Fed keeps trying to draw the noose tighter, but extraneous events like Brexit keep getting in its way.
In the meantime, a new crop of gold miners is coming through. Companies like Balmoral (TSE:BAR) and Pantoro (ASX:PNR) were substantially formed in the kernel of that post-Lehman gold price boom, while others like Perseus (ASX:PRU) were able to raise hundreds of millions of dollars to conduct exploration and development work which is now central to future growth.
But note that in the recent uptick, while gold has gone from around US$1,200 to around US$1,350, a rise of 12% or so, the share prices of these gold companies have doubled and in many cases more than doubled. The smart money is on the ground, digging the stuff up.